"A complex financial strategy that was supposed to save Philadelphia money on bonds it sold investors in the mid-2000s could end up costing the city up to $186 million, compared with what issuing simple fixed-rate bonds would have cost, city treasurer Nancy Winkler told City Council members at a hearing Tuesday organized by Jim Kenney (D., at-large).

"The city arranged interest-rate swaps with Wall Street banks in exchange for up-front cash and to protect taxpayers from the risk of rising interest rates."

But "instead, the city found itself owing millions to the banks and its clients when interest rates fell, bond insurers failed, and financial markets froze in the crisis of 2008. Some swaps contracts lacked cancellation clauses, boosting the city's costs.

Whose idea was this? "We found it very difficult to find the documentation I would like to have seen, about why the city entered into swaps," said Winkler, a Mayor Nutter appointee who previously worked for Philadelphia-based Public Financial Management (PFM), financial adviser to Philadelphia under Nutter and to other communities across the U.S.

Where are the people who recommended that Philadelphia buy swaps? "The city's prior swaps advisers, the principals, were convicted and are mostly either in prison or awaiting sentence," Winkler said.

Winkler later confirmed she was referring to CDR Financial Products Inc., a Beverly Hills-based firm, and its founder, David Rubin, who pleaded guilty to federal fraud and conspiracy charges last winter after being charged with criminal bid-rigging by prosecutors in New York.

Rubin is awaiting sentencing, along with at least three of his former employees, on those charges, which did not focus on Pennsylvania transactions. Rubin was a financial backer of former Pennsylvania Gov. Ed Rendell, who named Rubin to his Harrisburg transition team and signed the 2003 law extending the use of swaps by towns in the state.